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Wireless auction was a 'disaster' for consumers, T-Mobile chief says

John Legere, leader of the third-largest wireless carrier in the US, is now calling on the US to change the way the auction is run.

The Federal Communications Commission's latest wireless spectrum auction, which raised a whopping $45 billion for the federal government, may have filled the government's coffers but it was a "disaster" for American mobile customers, said T-Mobile CEO John Legere.

John Legere, CEO of T-Mobile, speaks at an Un-carrier event in SF in 2014. Josh MIller/CNET

The FCC's most recent auction -- the typical way the US doles out wireless spectrum to phone and Internet service providers -- saw 94 percent of the licenses issued to just three companies: AT&T, Dish Network and Verizon. And that, says Legere, is bad for smartphone owners who will have to deal with potentially limited choices and higher wireless fees for decades to come.

"AT&T and Verizon showed that they can, and will, dig into their deep pockets to corner the market on available spectrum at nearly any cost," Legere said in a 1,000-word blog post Wednesday. "To add insult to injury, the FCC's rules actually allowed companies that don't provide wireless service at all to buy up huge amounts of spectrum and sit on it for 10 years!"

T-Mobile spent $1.8 billion in the auction that ended January 29, a paltry sum compared with the $10.4 billion shelled out by Verizon and the $18.2 billion offered up by AT&T, the top two largest wireless providers in the US. Legere said one reason T-Mobile spent so little in the auction is because it already owns a large swath of similar spectrum and it didn't need more. But he said that the next auction that the FCC plans to hold will be for low-band spectrum his company does need to remain competitive. He added that, if the FCC allows AT&T and Verizon to bid up the prices, his company may not be able to keep up.

"The rules for the next auction should be focused on fostering competition in the US wireless industry and doing what's right for the American consumer," Legere said. "Because overall, while the AWS-3 auction was a success for the US Treasury, it was a disaster for American wireless consumers."

Wireless spectrum -- the airwaves that carry digital communication signals -- is the life-blood of the mobile phone industry. It's also a limited resource since companies like Verizon, AT&T and T-Mobile have to license access to certain frequencies to build the wireless networks that, in turn, deliver service to smartphone users. The FCC controls the use of these licenses and auctions access to them at specific times. As fewer frequencies become available for license, the price of these spectrum licenses has skyrocketed -- making it difficult for smaller carriers to offer rival services at competitive prices.

Legere wants the FCC to hold the next auction as soon as possible and not wait for AT&T and Verizon to replenish their bank accounts. He also urged the agency to adopt rules that will set aside at least half the spectrum in the upcoming auction for smaller competitors. And he wants the FCC to change spectrum ownership rules so that large speculators can't buy spectrum licenses they have no intention of using.

"The decisions the Federal Communications Commission makes will forever determine the choices available to American wireless customers in the future," said Legere, who also called on consumers to contact the FCC and Congress to "demand a competitive, innovative future for US wireless."

Legere's blog post comes just weeks after the FCC closed its most financially successful wireless spectrum auction in the agency's history. It easily surpassed the agency's goal of generating at least $10.6 billion for the sale of 1,600 licenses.

The FCC is scheduled to auction its next set of spectrum licenses early next year. Those are considered even more valuable because the spectrum runs on a low-band frequency that allows signals to travel long distances and penetrate walls. The latest auction was for so-called "mid band" spectrum.

"While mid-band spectrum is ideal for data, low-band spectrum covers more distance and gets those signals deeper into your home and office," Legere said in his blog. "It gives a wireless network reach."

It is this low-band spectrum that T-Mobile and many other smaller competitive carriers, such as rural and regional operators like Mississippi-based C Spire, need. Without it, there's little chance they will be able to compete against AT&T and Verizon, which together have two-thirds of the nation's wireless customers and generate nearly $162 billion in annual wireless revenue. AT&T and Verizon already control 73 percent of the nation's low-band spectrum.

Legere's list of demands comes as Verizon hinted on Tuesday that it is considering not participating in the upcoming auction. Washington insiders say the company's remarks are likely a ploy to convince the FCC to give it and AT&T more time to replenish their bank accounts so that they will bid in the next auction.

Legere argues that if they are given that extra time, they will no doubt price smaller players out of the market. That's bad for consumers, he says, because T-Mobile and others can't compete without access to that spectrum.